On May 6, 2015, the Treasury Department’s Inspector General for Tax Administration, which oversees the IRS, revealed the IRS had refused to fire a majority of its own employees who were willfully violating federal tax law. What’s more, the nation’s tax enforcer actually gave awards and promotions to tax cheats within its ranks.
If only this were the first report of its kind.
Indeed, the agency has been plagued with reports of mismanagement, high error rates, fraud and general ineptitude for years.
On May 5, a government audit revealed the IRS paid $5.6 billion in erroneous tax credits in 2012 under a stimulus program related to college attendance. According to the IRS watchdog, more than 3.6 million taxpayers received the education credit, despite failing to prove college attendance or otherwise not qualifying for the program.
This photo taken March 22, 2013, shows the exterior of the Internal Revenue Service (IRS) building in Washington. (AP Photo/Susan Walsh)
In 2013, the IRS made between $13.3 billion and $15.6 billion in improper payments through the Earned Income Tax Credit program. In 2012, the agency made $11.6 billion to $13.6 billion in improper payments. In 2011, improper payments reached between $13.7 billion and $16.7 billion. In 2010 — you get the idea. Between 2003 and 2013, the amount of improper payments through the tax credit program were estimated to reach up to $148.2 billion.
Similarly, the IRS made between $5.9 billion and $7.1 billion in improper child tax credit payments in 2013 — an error rate of 25 to 30 percent. A previous government report revealed that $4.2 billion in child tax credits in 2010 were paid to people not authorized to work in the United States.
In 2012, another government audit concluded that IRS management encouraged employees to ignore potentially fraudulent applications for Individual Taxpayer Identification Numbers for the sake of speedy processing. Such ID numbers are given to taxpayers ineligible for Social Security numbers. What’s more, the audit found multiple indicators of potential fraud — for example, in 2011, nearly 24,000 tax refunds using the taxpayer identification numbers were issued to a single address in Atlanta, Georgia, for a total refund amount of more than $46 million. It also found 154 mailing addresses that were used more than 1,000 times on the applications. Yet, according to government report, there was “no indication that the IRS uses application information included in its Real-Time System to identify potential fraud schemes.”
In January 2015, the IRS warned that taxpayers calling the agency for assistance would face long waits due to budget cuts and estimated it would answer less than half of the phone calls it received. Yet an April 2015 report from the House Ways and Means Committee suggested the cuts to customer service were purposeful, with the agency unnecessarily diverting funds away from customer service while prioritizing employee bonuses.
This is the same agency that has drained the bank accounts of innocent individuals and businesses under civil forfeiture laws. It is the same agency whose employees spent nearly half a million hours in 2014 — and drew $23.5 million in salary and benefits — conducting union business on the clock. It claims to lack sufficient resources, yet it spent a staggering $50,000 producing videos, including a Star Trek parody, for a single conference.
Of course, the bungling of tax administration pales in comparison to the IRS targeting scandal, when it was revealed the nation’s tax collector was using its authority to deny and delay tax-exempt status to certain political groups — a blatant use of government power to target political opponents. The Lois Lerner email saga continues to this day, and thousands of emails the IRS assured Congress and the public were permanently lost have reportedly been found by the agency responsible for IRS oversight.
To be sure, the IRS — and the broader question of simplifying the tax code — will be a centerpiece of the 2016 Republican primaries. Candidates Ted Cruz and Rand Paul have both called for a flat tax, Marco Rubio has championed a two-tiered tax plan and Mike Huckabee is pushing for a national sales tax.
Americans spend 6.1 billion hours annually complying with the United States’ massive, 9,000-page tax code. Yet, the call by Cruz and others to “abolish the IRS” has been derided as a “phenomenally bad idea,” because “someone has to collect the money.”
Of course someone has to collect the money; that tax administration requires tax collection is obvious. But the notion that we need the same IRS we have today — a 90,000-person force that has willfully ignored fraud, made billions of improper payments and targeted Americans for political reasons — is not so clear.
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